What Banks Know About You Could Be Good

My bank probably knew I’d sign up for a triathlon before I even committed to one. All the signs were evident in the transaction analytics: A competitive swimsuit, a book on racing triathlons, a new road bike, cycling shorts, and a triathlon shirt.

These “dip your toe” purchases follow my year and a half of snapping up running supplies and entering more than a dozen run-only races.

In fact, I’m pretty convinced a recent bump in my credit card limit was due to the bank observing my ramped-up athletics-related purchasing activity. An analytics engine somewhere in its glasshouse probably generated an alert on my account. It then likely crunched some numbers of what newbie triathletes typically spend, realized my limit was too low to support my habit, and triggered a virtual nod to marketing to assume the risk of extending me more credit via a low-interest/no-interest promotion.

While this might sound Big Brother-ish to my colleague Beth Schultz, to me it is a sign of the times. (See: Customer-Centric Banking Analytics Scares Me.) And were I someone who would have used the credit boost to purchase a high-end bike (I sensibly opted for a closeout sale model), I might have been glad it was there.

Banks have at their fingertips so much data that expecting them to look the other way and not customize offers based on a consumer’s granular behavior is far-fetched. They are spending millions each year on analytics software, infrastructure, and staff to figure out how to tailor offers and risk to individual customers rather than generic pools of consumers. The effectiveness of these efforts translates into return on investment.

They often share this data with other companies such as retailers. This practice, too, is offensive to some consumers. I agree with that camp when businesses don’t present customers with a clearly stated opportunity to opt out. If they do, then I am OK with the bank’s business arrangement with its partners.

Frankly, if I had started to receive coupons for all things triathlon, I actually would have been grateful -- this is an expensive sport! That said, if I were the father who started receiving Target coupons at his house for baby products before he knew his teenage daughter was pregnant, I might think otherwise of transaction-driven analytics. (See:Target Has You in Its Bullseye.)

Again, I do believe banks and credit card companies are compelled to be transparent in their use of analytics. They should clearly state their intentions to frequently review purchases, share data with partners, re-assess credit limits based on transaction history, and send offers based on their findings.

Once they’ve come clean on their mission, they are free to use analytics to their benefit within reason. And, yes, I am well aware that what constitutes “within reason” is, like many things in the analytics realm, a hot-button issue that has to be hashed out. Until then, I’ll wait patiently for that half-off deal for a new wetsuit.

Are you OK with your bank cranking up its customer intelligence initiatives? Chime in with your opinions below.

It might seem frustrating some time, but I think that is a good security feature.

I wouldn't mind if such a security is in place. It is for my own financial security. Putting in controls esp on credit card spending is extremely important as quite often it is one of the most targetted area of hackers.

Oh on the contrary, (as far as credit goes) most banks are in partnership with a Card Company (Discover, Visa, Master Card) and dont see the tender details of the card holder.

They see the total tender, and work through a maze of data transfers to authorize the transaction (Tsys to the card company to the Bank and the retailer).

The retailer knows far more than the the bank in this situation. Even in the situations where the bank holds the card product it typicaly does not store the transaction data. They have to work with a third party to get their hands on the details. It can be done, i've done it enough. So, yes they care what it is your buying (ever hear of Lifecycle marketing).

Selling data, as you stated is not likely in the near future. But hope is not lost. Most financial services companies (Yes, banks included) are learning the true meaning of CRM and the data that supports it, and that Customers are a key component of success. It may not change overnite but it will change. the data that has been sitting underutilized is now being looked at as an internal asset, with customer service at the forefront.

Banks do sit on a lot of data and they know it. But they still struggle with how to monetize it (believe me they want to). Trouble is, as ecox pointed out they don't really care if you're purchasing pattern indicates that you're likely to by snow gear from REI. How does that help them lend money or service customers (unless they have and REI credit card program)? It doesn't. Now if they could sell the data to REI then they'd have something. So far that's been legally and contractually problematic.

When considering the massive amounts of data and in the right hands Insights that are collected on individuals from most industries Banks should not be any different. Credit card companies (Most of which are NOT owned by a bank) collect far more data than most people can imagine. Where you shop, how often you shop, your typical spend amount (RFM Models). These are used HEAVILY to aid in avoiding fraud. My wife and i like to travel, we drive across the country. We have such tight controls on our credit cards that we need to inform the CC companies of where we plan on going so that the charges will be approved, and not fall into the FRAUD alert system. Is this to much knowledge from the CC companies? I do not believe so.

Retailers join all trackable tenders together to get a holistic view of their customers. Once a spend profile is established they can fill in the spend gaps (Cash transactions) by identifying the merchandise that is not showing up in your baskets. When you also include the On-line data that is available (Sourcing sites - destination sites) purchase history, interest levels, other sites shopped....

Nice exercise in analytics and predictive methods.

Now, As Beth stated banks are in the business of making money. OH SHOCK!!! They are not a Not-for-profit business. They sell products and services to both customers and prospects just like most other businesses. But, one big difference between banks and other retailers is the extremely high level of scrutiny from federal agencies and regulators. There cannot be any mis-use of data. There are fields that cannot be used for model development... period. There are clear goverance rules surrounding offer management as well as data management.

So they use the data just like any retail organization to make the best offer based off of needs and wants. While following the governance of regulators.

In my past (Retail world) i either managed or organized a large number of focus groups around the topic of consumer data usage. The vast majority of consumers told us they did not mind retailers or organizations collecting data information around their product use. As long as the offers that were made back to them were relevant, meaningful and 1:1 personal. They wanted offers developed for them, that saved them money.

I agree with the comments around better customer relations, better loyalty management, and better service. Cannot agree more, and you will find these topics being discussed at every senior leadership meeting, across the industry. Most companies would be better off focusing on this as a clear objective.

As far as i know Banks do not sell their data to third party companies. But this data is available from other sources. So the marketing material you receive (Junk Mail) was most likely NOT sourced from banks.

One final thought. My experience has showed me the massive amounts of consumer data i was able to collect, model, target from, measure incrementality that was available to me from the Retailer side was larger and more "Usable" than a typical bank can collect and use.

Some of you would be very surprised at the amount of data that is available to analyst on a person by person level. Every click, screen, tender, view and collected somewhere. Google your name sometime, or your phone number.

Banks could be great. With they data they own, banks could do so much better than just letting people "opt out" of useless credit offers and other junk.

Does anyone use Mint.com ? It's a website and phone app that gathers transactional data from your various banking and credit card sites. Using your information they suggest products for you, yes, but that's not the real attraction. Mint offers access to all your accounts in one place with some nifty budgeting software and alerts when you exceed one category or another. This can actually help people.

"Don't be evil" is a weak aspiration. What prevents banks from using their information to serve customers?

Has anyone in the A2 community ever been negatively affected by the information their banks share with associate companies without their consent? The only annoyance I've experienced so far is unsollicited ads and phone calls that I use to decline. I don't think it hurts to recieve offers that may be valuable sometimes.

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